Budget may allocate Rs 5,000 cr to NITI Aayog as discretionary fund

The Budget may allocate about Rs 5,000 crore as discretionary fund at NITI Aayog’s disposal for rewarding states undertaking economic reforms and making focused interventions to address local problems, sources said.

Despite recent criticism from some quarters, including opposition parties that the NITI Aayog, without the plan fund allocation powers as enjoyed by  its predecessor Planning Commission, has become a toothless body, the government has no intention to revert to the old model which holds no relevance in today’s times,the sources added.

With higher untied funds to the states according to the recommendations of the 14th Finance Commission (FFC) (42% share in central taxes as against 32% earlier), the bulk of the fund allocation process has become non-discretionary. The FFC recommendations increased total untied transfers to states in the the five years through FY20 to 47.7% of the divisible pool, up from over 39% between FY11-15, giving a tremendous boost to states’ fiscal space and spending flexibility.

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Also, after the FFC, 66 centrally sponsored schemes (CSSs) has been trimmed broadly to 30, entailing a higher tab for states in some CSSs as they now have more discretionary funds.

According to an official, a suggestion was put forth that NITI Aayog should have a flexible kitty that will enable it to fund special schemes or projects for the backward districts or regions such as the Northeast.

After the abolition of Planning Commission and setting up of the NITI Aayog in January 2015, mainly as a think-tank for forging a national vision on development, the government has given the plan fund allocation powers to the finance ministry. After the current five-year plan period ends in 2016-17, the Centre is likely redefine the classification of plan and non-plan expenditure as capital and revenue expenditure, to make accounting simple.

During an interaction with Express group reporters in December 2015, NITI Aayog vice-chairman Arvind Panagariya had also expressed the need for a special fund to cater to special needs or to promote reforms.